Critical Analysis


  1. Introduction

Human Capital Development (HCD), as a growing discipline, as such; borrows much from other fields of academia, in essence, is shorn of a conventional framework to be utilized practically. To that end, HCD is an applied discipline that necessitates a sound theory to accord it a contextual framework that will facilitate its application and discourse. We shall discourse to approaches in response to the implementation of Human Capital Development, namely, systems theory and psychological theory (Swanson, 2001). This paper will seek to discuss the inference of both systems theory and psychological theory in the application of Human Capital Development (HCD). To achieve such, the paper will represent the strengths (arguments in favor of) and weaknesses (criticism) of the use of a specific theory in HCD.

  1. Exposition

Systems Theory 

Systems theory, as developed by Luhmann, remains to be one of the most influential organizational methods brought forward for study to achieve corporate best practice. System and interdependence are the critical concepts of the theory. Luhmann (2000) defined a system as a united collection of distinct, inter-reliant as well as interrelated components that may be artificial or natural. The theory perceives an organization to be self-maintaining as well as composing of communications and actions, such as decisions. By mentioning this, the method denotes that the organization exemplifies a living creature with mutually supporting components within its milieu, each with its distinct unique purpose as well as interconnected tasks. Concerning human capital development, an organization represents the system, while communication, decisions, and actions represent the parts of the system. Human capital development entails a procedure of accentuating an establishment’s staff capabilities, relatable resources, including performance. HCD, for that reason, critical to the augmentation and efficiency of any organization. In the lens of systems theory, human capital development¬†integral components (resources, capabilities, and performance) form a cohesive whole that makes up the entire organization. In principle, the human capital(s) that ascertain ventures runs are assets to be invested in by the organization.

Swanson (2001) defines a system as a set of elements working concertedly as parts or components of an interconnecting mechanism or a multifaceted whole. To this end, four elements make up a system: input, process, feedback, and output. Input affects process and process impacts output, which affects feedback. Feedback tends to affect feedback, causing a continuous loop.

Psychological Theory

Psychology covers human mental processes and behavioral science. The psychology discourse encompasses three prime theories: namely, gestalt, cognitive, and behavioral. Behavioral psychology entails the study and adjustment of individual’s conducts, counting their thoughts, emotions as well as actions. Approaches that may be implemented using the technique include operant conditioning, cognitive restructuring,¬†and behavioral¬†modeling, including continued learning and motivation (McGoldrick, Stewart, & Watson, 2001). The cognitive aspect of psychology covers mental events, which are defined as determinants and behavior-adjustments that mutually affect each other by way of the state mind and environmental stimuli.

As such, the psychological theory covers the human aspects of HCD, together with the interrelatedness of technical and social features of an organization and those who help oversee its functioning (employees). The principal of organization practice underpins human behavior, mental processes, and their corresponding determinants. Besides, psychological theory similarly constitutes to adult learning; inferring employees (human capital) for the reason that every kind of labor is hardly considered equivalent. Organizations can enhance human capital by backing the education, training, as well as merits of their members of staff. Ideally, human capital is recognized to espouse a profound correlation with productivity, profitability, including economic growth. (McGoldrick, Stewart, & Watson, 2001).

  1. Critical Section

Systems theory

Criticism: The view that a system (organization) is capable of self-creating, as well as self-maintaining, renders the system theory less effective in HCD practice since it doesn’t champion inclusion. Organizations do not operate in isolation, as many external factors influence their operation and functions, including managing human resources. Notably, human capital development policies are directly affected by competitors, regulations, and labor trends. In this way, systems theory discounts the elements as mentioned earlier that impact on business particularly with a bias to HCD, as opposed to psychological theory, which offers a framework of developing human resources for sustainable growth and helping the establishment to earn a competitive edge. As discussed later, a human resource manager could incorporate market trends in training and motivating employees, which makes psychological theory a more inclusive theoretical framework compared to systems theory (Lerner, 2001).

An argument in favor of systems theory: Systems theory is crucial in HCD as it gives a good picture of an organization as a large system made up of small subsystems, mainly communication, decisions, and actions (on a social purview). Through analysis of different units and the interaction of multiple elements, HRM can increase the value of human resource within an organization. Actions such as employee engagement and training, talent management, HR motivation through competitive staff compensation schemes and effective communication networks are factors that interact within the pertinent aspects of system theory to augment the efficacy of HCD.

Additionally, by borrowing cues from Swanson (2001), who argues that a system that is capable of self-creating, as well as self-maintaining, reduces the direct influence of external environment on an organization’s internal processes, one can indirectly assimilate external events into HCD. A particular HR manager can research on trends in the labor market and regulations and translate the findings in a manner that suits the system’s internal configuration. Such an idea is consistent with Lahmann’s (2000) claim that global elements can feature in an organization as internal communication.

Evaluation: Despite considering an organization to be capable of self-creating as well as self-maintaining, systems theory, in its conceptual architecture, seems to offer a fundamental basis for advancement in HCD. According to systems theory, only internal subsystems explicitly affect each other and the overall system. This aspect does not entirely rule out the existence of an external environment as the previous criticism may have implied. What the model holds is that HRM must first convert all factors that are outside the system to a form that can be assimilated into the system as it takes in necessary instructions through communication. If a manager wishes to develop employees to adopt new market innovations, for instance, he or she can do this by training his employees or communicating such trends within the organization.

Psychological theory

Criticism: Psychological approach of HCD emphasizes the development of human capital deprived of factoring in other subsystems that augur well with HRM, such as economic resources. This theory is all about improving the organization, management, leadership, and general performance of human capital by examining the determinants of human mental processes and behavior. By adopting the psychological theory, an organization tends to lack an accurate image of the operations leading to employee individual growth and company performance. For example, systems theory groups different factors that lead to HR development as subsystems to easily track the performance of each small system (Swanson, Holton, & Holton, 2001).

Arguments for: A framework that covers fundamentals of human capital development in an organization in all aspects, including cognitive, behavioral, and continuous learning is ideal for use in HCD: psychological theory meets the criterion. In efforts to depict human capital as among the most critical assets, the organization has, psychological theory blends all the above elements. An organization, through the behavioral component, can develop behaviors of process workers, leaders, and individual contributors (Lerner, 2001). Using performance-based strategies in promoting and rewarding employees is a crucial element here. But utilizing cognitive psychology, HCD may harmonize behaviors and goals among leaders, process owners, and individual workers. This could be attained by training employees and engaging the right delivery methods when doing so as adults are self-driven concerning learning. As such, psychological theory, unlike systems theory, could be a lens of viewing human capital development in all angles: motivational, educational, and functional.

Evaluation: Psychological theory offers a suitable framework for motivating, training, and retaining employees, which is a primary goal of HCD. It provides a comprehensive view of HCD from a behavioral perspective to cognitive viewpoint. The model entails inspiring employees through competitive remuneration schemes and healthful working conditions as well as training them to increase their performance (McGoldrick, Stewart, & Watson, 2001). This factor supersedes the previous argument that psychological theory merely overlooks the economic aspect because improved performance leads to profitability.

  1. Conclusion

In summary, HCD as a growing discipline that necessitates a sound approach for effective practice. Systems theory, one of the prime approaches, takes into consideration an organization as a system composed of multiple subsystems that are interdependent. The theory could be used to treat factors that affect HCD as subsystems and monitor and engage them in developing human resource. Psychological theory, on the contrast, is embedded in human behavior improvement and mental process adjustments. An organization can apply the model to bolster morale and abilities of workers and leaders (mentally and behavioral) for maximum performance and productivity. Despite the apparent strengths, each of these theories seems to have weaknesses, which is addressed by the other. Mainly, organization and scholars need to consider integrating both approaches for effective and sustainable HCD.


Lerner, R. M. (2001). Concepts and theories of human development. Psychology Press.

Lynham, S. A. (2000). Theory building in the human resource development profession. Human Resource Development Quarterly, 11(2), 159-178.

McGoldrick, J., Stewart, J., & Watson, S. (2001). Theorizing human resource development. Human Resource Development International, 4(3), 343-356.

Swanson, A. (2001). “Human resource development and its underlying theory.”¬†Human Resource Development International¬†4(3): 299-312.

Swanson, R. A., Holton, E., & Holton, E. F. (2001). Foundations of human resource development. Berrett-Koehler Publishers.

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